Disclosure Document CARAT Capital L.L.C. Non-Linear Financial Program Non-Linear Commodities Program Non-Linear Stock Index Program October 21, 2005 Regulations of the Commodity Futures Trading Commission ("CFTC") require that a Trading Advisor provide each prospective client with a "Disclosure Document" containing information regarding its performance record, the risks of commodity trading, and other information about the advisor. This Disclosure Document has been prepared for the prospective clients of CARAT Capital L.L.C. ("CARAT"). The CFTC requires that each client sign, date and return a written acknowledgment of receipt of this document prior to initiating an account with CARAT. Such an acknowledgment is attached to this document. THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT. This Disclosure Document should be read carefully by all prospective clients since it contains important information about CARAT and its trading programs. CARAT Capital L.L.C. 101 West 79th Street, 5C New York, New York 10024 (212) 873-2107 RISK DISCLOSURE STATEMENT THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING: IF YOU PURCHASE A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS. IF YOU PURCHASE OR SELL A COMMODITY FUTURE OR SELL A COMMODITY OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUIRED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT. UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A "LIMIT MOVE." THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A "STOP-LOSS" OR "STOP-LIMIT" ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. A "SPREAD" POSITION MAY NOT BE LESS RISKY THAN A SIMPLE "LONG" OR "SHORT" POSITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR ON PAGE 5. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY THIS DISCLOSURE DOCUMENT AND COMMODITY TRADING BEFORE YOU TRADE, INCLUDING THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT ON PAGE 3. i RISK DISCLOSURE STATEMENT -- CONTINUED YOU SHOULD BE AWARE THAT THIS COMMODITY TRADING ADVISOR MAY ENGAGE IN TRADING FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE YOUR TRANSACTIONS MAY BE EFFECTED. BEFORE YOU TRADE YOU SHOULD INQUIRE ABOUT ANY RULES RELEVANT TO YOUR PARTICULAR CONTEMPLATED TRANSACTIONS AND ASK THE FIRM WITH WHICH YOU INTEND TO TRADE FOR DETAILS ABOUT THE TYPES OF REDRESS AVAILABLE IN BOTH YOUR LOCAL AND OTHER RELEVANT JURISDICTIONS. THIS COMMODITY TRADING ADVISOR IS PROHIBITED BY LAW FROM ACCEPTING FUNDS IN THE TRADING ADVISOR'S NAME FROM A CLIENT FOR TRADING COMMODITY INTERESTS. YOU MUST PLACE ALL FUNDS FOR TRADING IN THIS TRADING PROGRAM DIRECTLY WITH A FUTURES COMMISSION MERCHANT. ii Table of Contents Page Risk Disclosure Statement i Table of Contents iii Information about the Trading Advisor and the Program 1 Corporate and Principal Information 1 Trading Programs 2 Minimum Investment 3 Litigation 3 Principal Risk Factors 3 Trading for Own Account 4 Fees 5 Conflicts of Interest 5 Brokerage Arrangements 5 Privacy Policy 6 Anti-Money Laundering 6 Special Disclosure for Notionally-Funded Accounts 7 Matrix for Computing Performance of Notional Accounts 7 Performance 8 Receipt of Disclosure Document Acknowledgment 13 iii Information about the Trading Advisor and the Program Corporate and Principal Information CARAT Capital L.L.C. is a Delaware limited liability company formed in 1996. CARAT has been registered with the Commodity Futures Trading Commission as a commodity trading advisor since April 17, 1996 and has been a member of the National Futures Association since April 17, 1996. CARAT maintains its place of business, and its books and records, at 101 West 79th Street, 5C, New York, NY 10024. Its telephone number is (212) 873-2107. The date of this disclosure document is October 21, 2005. Carlton J. Chin, CFA is a Principal of CARAT Capital L.L.C. CARAT (Computer Aided Research & Advanced Technology) specializes in advanced and innovative quantitative investment strategies. Prior to founding CARAT Capital (in April 1996), Carlton was a portfolio manager for Beacon Management and was a chief researcher for Mount Lucas where he was a specialist in risk management and trading systems (October 1993 to February 1996). Carlton was also the manager of investment consulting at Kwasha Lipton, an actuarial consulting firm. Carlton ran the GIC consulting business ($2 billion under advisement), where he structured and invested fixed income portfolios, and performed asset/liability studies, asset allocation, performance attribution, and manager evaluation. Carlton has practical experience as an actuary and was with Kwasha Lipton from January 1987 to September 1993. Carlton earned both his S.B. and S.M. from the Massachusetts Institute of Technology, completing the requirements for his masters degree at age 21. His degrees are in engineering, with minors in business and economics. Carlton earned the professional designation of Chartered Financial Analyst (CFA) and is registered with the Commodity Futures Trading Commission, and National Futures Association. He is also a member of the Association of Investment Management and Research (AIMR) and the New York Society of Securities Analysts. Rose Wang Chin is a Principal of CARAT Capital. Her responsibilities encompass all aspects of the business. Prior to joining CARAT (in September 1997), Rose was a Management Associate and Officer of Citibank, where she worked in both "Corporate Finance" and "Private Banking." Her focus was on tax-driven/credit securitization structures, as well as forecasting models. Rose completed Citicorp's Global Finance Institute Program and was with Citibank from July 1995 to September 1997. Before Citicorp, Rose completed an M.B.A. at Wharton (in June 1995) and a dual internship at the Federal Reserve Bank of New York: "Financial Market Analysis" and "Foreign Exchange" (May 1994 to August 1994). Rose's research at the Federal Reserve focused on the monitoring of derivatives and financial market volatility. Rose also has experience as an actuarial analyst and was with Kwasha Lipton from January 1991 to August 1993. Rose earned an M.B.A. from the Wharton School at the University of Pennsylvania. She also graduated cum laude from Smith College in 3.5 years with a B.A. in Economics and Computer Science. Rose is registered with the Commodity Futures Trading Commission and National Futures Association. The performance history of CARAT Capital L.L.C. can be found in the "Performance" section on page 8. 1 Trading Programs CARAT Non-Linear Financial Program CARAT's Non-Linear Financial Program applies a non-linear mathematical approach to the financial markets. The program is unique because it uses modern research and technology - such as neural networks, knowledge discovery, and artificial intelligence. The Non-Linear Financial Program applies these non-linear approaches in combination with risk management and portfolio diversification. The program invests in financial futures and options markets around the world - focusing on currencies, short-term and long-term interest rates, and stock indexes - and is diversified in terms of the number of markets traded and the number of quantitative approaches. CARAT anticipates that the program may hold positions at any one time in as many as twenty-five different futures and options interests and expects that up to twenty percent of an account's assets will be committed to margin. CARAT Non-Linear Commodities Program CARAT's Non-Linear Commodities Program applies a non-linear mathematical approach to the commodities markets. The program is unique because it uses modern research and technology - such as neural networks, knowledge discovery, and artificial intelligence. The Non-Linear Commodities Program applies these non-linear approaches in combination with risk management and portfolio diversification. The program invests in commodity futures and options markets around the world - focusing on energy, metals, grains, meats, and soft commodities - and is diversified in terms of the number of markets traded and the number of quantitative approaches. CARAT anticipates that the program may hold positions at any one time in as many as twenty different futures and options interests and expects that up to twenty percent of an account's assets will be committed to margin. CARAT Non-Linear Stock Index Program CARAT's Non-Linear Stock Index Program applies a non-linear mathematical approach to the equity markets. The program is unique because it uses modern research and technology - such as neural networks, knowledge discovery, and artificial intelligence. The Non-Linear Stock Index Program applies these non-linear approaches in combination with risk management and portfolio diversification. The program invests in stock index futures and options markets around the world and is diversified in terms of the number of markets traded and the number of quantitative approaches. CARAT anticipates that the program may hold positions at any one time in as many as ten different futures and options interests and expects that up to twenty percent of an account's assets will be committed to margin. Other Information Diversification may be limited during the start-up period and will vary depending upon the size of the client account. CARAT reserves the right to refine its trading programs, including, but not limited to, adding or deleting markets from the portfolios without prior approval by, or notice to, the client. As the trading programs to be used by CARAT are proprietary and confidential, the above discussion is necessarily of a general nature. The CFTC and futures exchanges impose speculative position limits, i.e., a maximum net long or net short speculative futures position which one trader may hold or control in any contract market. For purposes of determining speculative position limits, all accounts owned or managed ("controlled") by CARAT and its principals must be aggregated. Consequently, these limits may act to limit the size of positions that might otherwise be taken. To the extent that such speculative position limits affect the size of positions held by CARAT and CARAT clients, CARAT intends to limit the size of positions carried on a pro rata basis. 2 Minimum Investment The minimum investments for CARAT's Programs are as follows: Program Minimum Investment Non-Linear Financial Program $500,000 Non-Linear Commodities Program $500,000 Non-Linear Stock Index Program $200,000 The advisor, at its discretion, may accept a lower minimum investment. Litigation There has never been a material administrative, civil, or criminal action regarding CARAT or its principals. Principal Risk Factors Investors considering an investment in a commodity trading program should be aware that there are many risks, such as, but not limited to, those listed below: (1) Futures Trading is Speculative and Volatile. Futures contract prices are highly volatile. Price movements for futures contracts may be influenced by, among other things, changing supply and demand relationships, weather, agricultural, trade, fiscal, monetary, and exchange control programs and policies of governments, domestic and foreign political and economic events, changes in domestic and foreign interest rates and rates of inflation, currency devaluations and re-valuations, and emotions of the marketplace. In addition, governments from time to time intervene directly and by regulation in certain markets, particularly those in currencies and gold. Such intervention is often intended to influence prices directly. None of these factors can be controlled by CARAT, and no assurance can be given that CARAT's advice will result in profitable trades for a client or that a client will not incur substantial losses. (2) Futures Trading is Highly Leveraged. The low margin deposits normally required in futures trading (typically between 2% and 25% of the value of the contract purchased or sold) permit an extremely high degree of leverage. Accordingly, a relatively small price movement in a contract may result in immediate and substantial losses to the investor. Like other leveraged investments, any trade may result in losses in excess of the amount invested. (3) Futures Trading May be Illiquid. Most United States commodity exchanges limit fluctuations in futures contract prices during a single day by regulations referred to as "daily limits." During a single trading day, no trades may be executed at prices beyond the daily limit. Once the price of a particular futures contract has increased or decreased to the limit point, positions in the futures contract can be neither taken nor liquidated unless traders are willing to effect trades at or within the limit. Futures prices have occasionally moved the daily limit for several consecutive days allowing little or no trading. In addition, even if prices have not moved the daily limit or no such limits are in effect for the contracts traded, the investor may not be able to execute trades at favorable prices if little trading in the contracts involved is taking place. Under some circumstances, a client might be required to make or take delivery of the commodity underlying a particular contract if the position cannot be liquidated prior to its expiration date. In addition, if CARAT deems it to be in the best interests of the client, it may make or take delivery of an underlying commodity on behalf of the client. It is also possible that an exchange, or the CFTC, may suspend trading in a particular contract, order immediate settlement of a particular contract, or order that trading in a particular contract be conducted for liquidation only. Options trading may be restricted in the event that the underlying futures contract becomes restricted, and options trading may itself be illiquid at times, irrespective of the condition of the market of the underlying futures, making it difficult to offset option positions in order to realize gains thereon, limit losses, or change positions in the market. 3 (4) Counterparty Credit Risks. A FCM or IB, or a foreign entity in dealing with foreign futures and options, may experience financial difficulties that may result in the inability or refusal to perform all of its obligations -- or even failure. This can lead to partial payment or non-payment of funds due to clients; in some cases it may be impossible to collect amounts owed, particularly from foreign entities. (5) Risk of Exchange Rate Fluctuations. Foreign contracts in futures and options are often denominated in currencies other than the US dollar. Currency values fluctuate continually, and sometimes violently, causing large swings in the value of positions held. Substantial loss can result from such positions due to fluctuations in currency values. The foregoing list of Principal Risk Factors does not purport to be a complete explanation of the risks involved in commodity trading. Potential investors should read the entire Disclosure Document and consult with their financial advisors before deciding whether to invest in the program. Trading for Own Account CARAT and its principals may trade futures interests for their own accounts. Thus, there is a potential conflict of interest with respect to any client. As a general matter, the records of trading by CARAT, its principals, its employees, and its affiliates will not be made available to clients because of their confidential nature. CARAT has established written policies with respect to the proprietary trading of the commodity trading advisor ("CTA") and its principals. These written policies are available upon request. 4 Fees CARAT is paid a management fee, payable monthly, equal to two-twelfths of one percent (2/12 of 1%), based upon the net asset value under management at the beginning of each month (two percent (2%) annually). In addition, the advisor is paid an incentive fee, payable quarterly, equal to twenty percent (20%) of net new profits, both realized and unrealized, during the calendar quarter. Fees for the management of large accounts, commodity pools, and funds may differ from the above schedule. Net asset value is defined as total assets minus total liabilities, determined in accord with generally accepted accounting principles, with each position in a commodity interest accounted for at fair market value. Net new profits is the net cumulative profit, both realized and unrealized, from futures trading and interest income for the calendar quarter, after subtraction of accrued management fees. Any trading losses from prior periods must be recouped and a new high in cumulative trading profit must be achieved before further incentive fees are payable. Conflicts of Interest All futures accounts owned or controlled by CARAT will be combined for CFTC and exchange limit purposes. In addition, the positions controlled by CARAT may be required to be aggregated with positions maintained or controlled by its affiliates. Such aggregation could require a reduction in a client's positions or limitations on the trading in the client's account. Since CARAT may manage more than one account, trading decisions for the accounts it manages may be made at or about the same time. These various accounts may be deemed to be competing for the same or similar positions in the market. In addition, CARAT may use a number of different trading strategies and systems to trade proprietary and other client accounts. As a result, trading decisions generated by one trading program and trading decisions made by another, may be entirely different. In fact, depending upon the program being used, a client may have positions opposite to those of another client. To the greatest extent practicable, however, a client who has selected one of CARAT's programs will have the same positions as all other clients participating in that program. The principals of CARAT may also be principals of other commodity trading advisors ("CTAs"), commodity pool operators and investment advisors. To the extent that they devote their efforts to these other firms, they will have less time for CARAT. CARAT and its principals may have commodity accounts at the same brokerage firms as clients, and may, because of the amount traded through the brokerage firms, pay lower commissions than clients. In evaluating these potential conflicts of interest, clients should be aware that CARAT has a duty to exercise good faith and fairness in all dealings affecting the accounts of its clients. Brokerage Arrangements Clients may select the Futures Commission Merchant ("FCM") and Introducing Broker ("IB") for his or her account. Neither CARAT nor its principals will participate in commissions charged the account; however, they may benefit indirectly from the choice of a broker if the broker introduces accounts to CARAT. 5 Privacy Policy Pursuant to Commodity Futures Trading Commission rules, financial institutions like CARAT are required to provide privacy policy notices to their clients. CARAT believes that protecting the privacy of clients' nonpublic personal information ("personal information") is of the utmost importance. Personal information is nonpublic information, about clients who are natural persons, that is personally identifiable and that CARAT obtains in connection with providing a financial product or service to clients. CARAT Capital collects personal information about clients from the following sources: · Information CARAT receives from clients on managed account agreements and related forms (for example, name, address, Social Security number, birth date, assets, income, and investment experience) and · Information about clients' transactions with CARAT Capital (for example, account activity and balances). CARAT Capital does not disclose any personal information about its clients or former clients to anyone other than in connection with the administration, processing, and servicing of client accounts or to CARAT's accountants, attorneys, and auditors or as otherwise permitted or required by law. CARAT restricts access to personal information it collects about clients to its personnel who require that information in order to provide products or services to clients. CARAT maintains physical, electronic, and procedural controls in keeping with federal standards to safeguard clients' personal information. If the relationship between a client and CARAT ends, CARAT will continue to treat clients' personal information as described in this notice. CARAT reserves the right to change this privacy notice, and to apply such changes to information previously collected, as permitted by law. CARAT will inform clients of any such changes as required by law. Anti-Money Laundering In order to comply with laws and regulations aimed at the prevention of money laundering and prohibiting transactions with certain countries, organizations, and individuals, CARAT may request any information deemed necessary, in its sole discretion, to verify the identity of a client and to determine whether a client is permitted to be a client of CARAT. 6 Special Disclosure for Notionally-Funded Accounts You should request your CTA to advise you of the amount of cash or other assets ("Actual Funds") which should be deposited to the advisor's trading program for your account to be considered "Fully-Funded." This is the amount upon which the CTA will determine the number of contracts traded in your account and should be an amount sufficient to make it unlikely that any further cash deposits would be required from you over the course of your participation in the CTA's program. You are reminded that the account size you have agreed to in writing (the "nominal" or "notional" account size) is not the maximum possible loss that your account may experience. You should consult the account statements received from your futures commission merchant in order to determine the actual activity in your account, including profits, losses, and current cash equity balance. To the extent that the equity in your account is at any time less than the nominal account size you should be aware of the following: (1) Although your gains and losses, fees and commissions measured in dollars will be the same, they will be greater when expressed as a percentage of account equity. (2) You may receive more frequent and larger margin calls. (3) The disclosures which accompany the performance table may be used to convert the rates-of-return ("RORs") in the performance table to the corresponding RORs for particular partial funding levels. The incentive fee is based on net new trading profits achieved trading the nominal account size, regardless of funding level. The management fee is based on the designated nominal account value (adjusted for additions, withdrawals, and trading performance). Our programs typically generate commission charges of 0.3%-2% per year for a fully-funded account. It is important to note that fees and commissions, as a percentage of account equity (or actual assets), will be greater than when expressed as a percentage of nominal account size. For example, a 2% management fee on the nominal account size will equal 4%, when expressed as a percentage of actual assets, for a 50% funded account. Matrix for Computing Performance of Notional Accounts The matrix allows a Client to take the (1) "Actual Rate-of-Return" for a given program at (2) various "Levels of Funding" and compute the (3) adjusted "Rate of Return at Various Funding Levels." (2) Level of Funding (1) Actual Rate of Return 100% Funded 75% Funded 50% Funded 25% Funded 40% 40.0% 53.3% 80.0% 160.0% 30% 30.0% 40.0% 60.0% 120.0% 20% 20.0% 26.7% 40.0% 80.0% 10% 10.0% 13.3% 20.0% 40.0% 0% 0.0% 0.0% 0.0% 0.0% -10% -10.0% -13.3% -20.0% -40.0% -20% -20.0% -26.7% -40.0% -80.0% -30% -30.0% -40.0% -60.0% -120.0% (3) Rates of Return at Various Funding Levels (1) "Actual Rate of Return" represents the actual percentage rates of return for Fully-Funded accounts. (2) "Level of Funding" represents the percentage of Actual Funds divided by the Fully-Funded trading level. (3) "Rates of Return at Various Funding Levels" represents the rate of return experienced by a client at various levels of funding traded by the CTA. 7 Performance of the CARAT Non-Linear Financial Program as of 8/31/05* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Name of CTA: CARAT Capital L.L.C. Name of Trading Program: Non-Linear Financial Program Inception of Trading by CARAT Capital: 3/96 Inception of Trading in the Non-Linear Financial Program: 10/01 Number of Accounts Traded According to this Program: 1 Total Assets Managed by CARAT Capital*: $22,500,000 (Nominal Funds) Total Assets in the Non-Linear Financial Program*: $ 9,000,000 (Nominal Funds) Worst Monthly Percentage Drawdown**: -2.9 (3/02) Worst Peak-to-Valley Drawdown**: -4.0 (6/02 - 9/02) Number of Non-Linear Financial Program Accounts: Closed with Profits (last 5 years and year-to-date): 2 (+1.7% to +13.0%) Closed with Losses (last 5 years and year-to-date): 2 (-1.7% to -1.8%) Monthly / Annual Returns (%) Month 2005 2004 2003 2002 2001 January -1.1 -0.2 3.4 2.5 NA February -0.1 1.3 -0.9 3.6 NA March -0.6 -1.0 -1.1 -2.9 NA April -0.2 -0.3 1.2 1.8 NA May 0.4 -0.8 0.4 5.3 NA June -0.5 -0.2 -0.2 4.5 NA July 0.2 -0.6 -1.4 -2.3 NA August -0.3 0.2 1.3 -0.1 NA September -0.4 0.8 -1.6 NA October 3.1 1.3 0.7 1.7 November 1.1 0.6 -0.4 2.0 December 0.1 2.0 2.4 2.7 Year-to-Date -2.2 2.3 7.5 13.9 6.5 * Due to the timing of this disclosure document's preparation, some figures may be estimates. ** Drawdown means losses experienced by an account over a specified period. · This program was not charged a management or incentive fee until 11/03. · All annual and year-to-date rates-of-return are computed on a compounded monthly basis. 8 Performance of the CARAT Non-Linear Commodities Program as of 8/31/05* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Name of CTA: CARAT Capital L.L.C. Name of Trading Program: Non-Linear Commodities Program Inception of Trading by CARAT Capital: 3/96 Inception of Trading in the Non-Linear Commodities Program: 1/04 Number of Accounts Traded According to this Program: 3 Total Assets Managed by CARAT Capital*: $22,500,000 (Nominal Funds) Total Assets in the Non-Linear Commodities Program*: $11,500,000 (Nominal Funds) Worst Monthly Percentage Drawdown**: -1.7 (2/05) Worst Peak-to-Valley Drawdown**: -1.9 (1/05 - 4/05) Number of Non-Linear Commodities Program Accounts: Closed with Profits (last 5 years and year-to-date): 1 (+5.6%) Closed with Losses (last 5 years and year-to-date): 0 Monthly / Annual Returns (%) Month 2005 2004 January 1.0 -0.5 February -1.7 1.1 March 0.2 1.4 April -0.4 -1.4 May 0.1 3.4 June 0.2 0.5 July 0.2 0.9 August 0.8 -0.5 September 0.0 October 0.8 November -0.6 December 0.1 Year-to-Date 0.4 5.4 * Due to the timing of this disclosure document's preparation, some figures may be estimates. ** Drawdown means losses experienced by an account over a specified period. · This program was not charged a management or incentive fee until 8/04. · All annual and year-to-date rates-of-return are computed on a compounded monthly basis. 9 Performance of the CARAT Non-Linear Stock Index Program as of 8/31/05* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Name of CTA: CARAT Capital L.L.C. Name of Trading Program: Non-Linear Stock Index Program Inception of Trading by CARAT Capital: 3/96 Inception of Trading in the Non-Linear Stock Index Program: 1/04 Number of Accounts Traded According to this Program: 1 Total Assets Managed by CARAT Capital*: $22,500,000 (Nominal Funds) Total Assets in the Non-Linear Stock Index Program*: $ 2,000,000 (Nominal Funds) Worst Monthly Percentage Drawdown**: -1.0% (7/04) Worst Peak-to-Valley Drawdown**: -2.7% (2/04 - 9/04) Number of Non-Linear Stock Index Program Accounts: Closed with Profits (last 5 years and year-to-date): 0 Closed with Losses (last 5 years and year-to-date): 1 (-0.6%) Monthly / Annual Returns (%) Month 2005 2004 January -0.1 0.0 February -0.1 1.8 March -0.5 -0.3 April -0.3 -0.5 May 1.0 -0.9 June -0.1 0.3 July 0.8 -1.0 August 0.9 0.4 September -0.7 October 1.1 November 0.7 December 0.8 Year-to-Date 1.5 1.6 * Due to the timing of this disclosure document's preparation, some figures may be estimates. ** Drawdown means losses experienced by an account over a specified period. · This program was not charged a management or incentive fee until 8/04. · All annual and year-to-date rates-of-return are computed on a compounded monthly basis. 10 Performance of the CARAT Global Interest Rate Program as of 12/31/04* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Name of CTA: CARAT Capital L.L.C. Name of Trading Program: Global Interest Rate Program Inception of Trading by CARAT Capital: 3/96 Inception of Trading in the Global Interest Rate Program: 12/96 Number of Accounts Traded According to this Program: 0 Total Assets Managed by CARAT Capital*: $22,500,000 (Nominal Funds) Total Assets in the Global Interest Rate Program*: $ 0 (Nominal Funds) Worst Monthly Percentage Drawdown**: -1.6% (1/2000) Worst Peak-to-Valley Drawdown**: -3.8% (10/01 - 7/04) Number of Global Interest Rate Program Accounts: Closed with Profits (last 5 years and year-to-date): 2 (8% to 19%) Closed with Losses (last 5 years and year-to-date): 0 Please Note: The Global Interest Rate Program was discontinued as of 12/31/04. Monthly / Annual Returns (%) Month 2004 2003 2002 2001 2000 January -0.4 1.1 -0.2 6.3 -1.6 February 0.5 -0.1 0.0 1.8 -0.2 March 0.3 0.1 -1.5 1.4 2.0 April -0.6 0.1 -0.3 0.6 -1.2 May -0.4 -0.7 0.2 -0.2 -0.7 June -0.3 0.1 0.3 0.0 -0.1 July -0.2 -0.8 0.1 1.2 2.8 August 0.5 0.1 0.0 1.4 1.1 September 0.1 0.5 0.4 2.2 1.1 October 0.2 -0.7 0.1 0.8 0.9 November -0.2 -0.5 -0.3 -0.3 2.1 December 0.4 0.7 -0.6 -0.5 3.8 Year-to-Date -0.1 -0.3 -1.8 15.6 10.3 * Due to the timing of this disclosure document's preparation, some figures may be estimates. ** Drawdown means losses experienced by an account over a specified period. · This program was not charged a management or incentive fee. · All annual and year-to-date rates-of-return are computed on a compounded monthly basis. 11 Performance of the CARAT Flagship Program through 6/30/02 PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Name of CTA: CARAT Capital L.L.C. Name of Trading Program: CARAT Flagship Program Inception of Trading by CARAT Capital: 3/96 Inception of Trading in CARAT Flagship Program: 3/96 Number of Accounts Traded According to the CARAT Flagship Program: 0 Total Assets Managed by CARAT Capital*: $22,500,000 (Nominal Funds) Total Assets in CARAT Flagship Program*: $ 0 (Nominal Funds) Worst Monthly Percentage Drawdown**: -16.9% (9/98) Worst Peak-to-Valley Drawdown**: -42.5% (5/98 - 3/02) Number of CARAT Flagship Program Accounts: Closed with Profits (last 5 years and year-to-date): 0 Closed with Losses (last 5 years and year-to-date): 0 Please Note: The Flagship Program was discontinued as of June 30, 2002. Monthly / Annual Returns (%) Month 2002 2001 2000 1999 1998 1997 January -1.9 0.2 0.3 -9.2 -1.5 4.5 February 0.7 -2.0 -2.6 3.0 -7.0 2.8 March -1.9 1.5 2.3 0.0 9.3 -3.3 April 0.2 -10.3 5.7 6.9 -4.4 9.1 May 1.8 -2.1 -6.2 -3.7 6.5 -1.8 June 2.3 -1.7 3.3 0.2 -0.9 5.0 July -0.5 -0.5 -2.6 -1.2 10.0 August 0.8 4.0 3.8 -8.0 -8.2 September 4.3 -3.1 -0.6 -10.7 4.7 October -0.3 0.8 -5.5 -10.8 -12.7 November -1.4 -0.9 -1.5 -0.8 12.5 December -1.6 0.8 0.4 2.5 12.8 Year-to-Date 1.1 -12.9 3.3 -9.4 -25.6 36.8 * Due to the timing of this disclosure document's preparation, some figures may be estimates. ** Drawdown means losses experienced by an account over a specified period. · All annual and year-to-date rates-of-return are computed on a compounded monthly basis. · The data in this composite table does not reflect the performance of any one account. An individual account may have realized more or less favorable results than the composite results, but is typically within a +/-5% range of the composite. Such differences may be due to the timing of additions and withdrawals, various fee structures or commissions, interest earned, and/or the size of the account. 12 Receipt of Disclosure Document Acknowledgment I, ________________________________________________, acknowledge receipt of CARAT Capital's Disclosure Document, dated October 21, 2005. Signature ___________________________________________ Date _________________________